Q1. Differentiate between closing entries and adjusting entries. (3)
Q2. Why wrong inventory valuation effects two periods? Explain (3)
Q3. Is it necessary to review every cash transaction by its receipt? (3)
Q4. Explain how the adoptions of FIFO method rather than LIFO will tend to
raise or lower the quality of a company’s earnings? Assume the continuance of the
inflation. (5)
Q5. Patterson Company reported net income for the current year of Rs. 666,000.
During the year the company’s accounts receivable increased by Rs. 50,000,
inventory decreased by Rs. 23,000, accounts payable decreased by Rs. 55,000, pre-
paid expenses increased by Rs. 35,000, and accrued expenses payable increased
by Rs. 14,000. Determine the amount of cash provided by or used for operating
activities by the indirect method. (5)
Q2. Why wrong inventory valuation effects two periods? Explain (3)
Q3. Is it necessary to review every cash transaction by its receipt? (3)
Q4. Explain how the adoptions of FIFO method rather than LIFO will tend to
raise or lower the quality of a company’s earnings? Assume the continuance of the
inflation. (5)
Q5. Patterson Company reported net income for the current year of Rs. 666,000.
During the year the company’s accounts receivable increased by Rs. 50,000,
inventory decreased by Rs. 23,000, accounts payable decreased by Rs. 55,000, pre-
paid expenses increased by Rs. 35,000, and accrued expenses payable increased
by Rs. 14,000. Determine the amount of cash provided by or used for operating
activities by the indirect method. (5)
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